Obamacare Increases Personal Income...And Spending

Both income and expenditure increases exceed expectations for January.

Americans are making more and spending more, according to a January Personal Income and Outlays report (link opens as PDF) released today by the Commerce Department.

After flatlining for December, personal income increased 0.3% for January, beating analyst estimates by 0.1 percentage points. For the same period, personal spending accelerated even faster than income, up 0.4%. Analysts had predicted much milder 0.1% growth.

The Commerce Department took special note of the role of the Obamacare rollout, which led to increased spending on health care and increased government social benefit payments:

Measures of health care services were boosted $29.0 billion to reflect the effect of the ACA [Affordable Care Act] on demand for these services. ... Medicaid benefits were boosted $19.2 billion due to expanded coverage under the ACA.

In a potential sign of longer-term economic pessimism, durable goods spending dipped another 0.4% after falling 2.6% in December. According to The Wall Street Journal, January's decline was due mostly to a slump in auto sales. Services proved to be the bright spot starting 2014, with spending up 0.9%. The jump in spending on services was the result of of higher heating bills.

Comparing January 2014 to January 2013, personal income advanced 4.1%, while spending increased a slightly slower 3.5%.